Gardner Intelligence Blog

Production Growth Slower for 11th Month

In January, the Index for production of durable goods was 105.0, which was the third lowest level for the index since July 2019. Compared with one year ago, the index contracted 0.9%, which was the fifth straight month of contraction.

The annual rate of change, which is easier to correlate with other data points, grew 0.3% this month. The annual rate of growth decelerated for the 11th straight month. December’s growth rate was the slowest since May 2017, and it is likely to contract in the next month or two. Further, the key leading indicator of productiondurable goods new ordersis indicating contraction in production.

Machine Tool Unit Orders Show Improvement in December

December machine tool orders were 2,253 units and $397,555,000.

December’s unit orders were the highest since March 2019. On top of this, unit orders going back to December 2018 were revised upward a significant amount. This revision occurred mostly in the West and the month of August in the Southeast.

Durable Goods Orders Contract Faster

New orders for real durable goods totaled $247,645 million in December, which was down 5.2% from one year ago. Additionally, this was the fifth-straight month of contraction and the 10th month of contraction out of the last 11. The result was that the annual rate of change contracted 3.9%, moving at a faster rate of contraction for the fifth-straight month. This was the fastest rate of annual contraction since June 2016. However, durable goods orders should bottom out soon as consumer durable goods spending started growing at an accelerating rate in December.

Compared with one year ago, new orders for motor vehicles and parts contracted 4.5%. This was the fifth consecutive month of month-over-month contraction. The annual rate of growth, now 0.3%, decelerated for the sixth month. This was the slowest rate of annual growth since January 2018.

Durable Goods Spending Grows 8.0% in December

In December, the month-over-month rate of growth for durable goods spending was 7.9%, which was the fastest rate of growth since May 2018. This was just the second month of faster than average growth since July 2018.

The annual rate of growth accelerated significantly to 4.7%. This was the fastest rate since April 2019. Because the real 10-year Treasury rate declined in 2019, and because of the acceleration in quarterly growth, there should be further accelerating growth in the first quarter of 2020.

December Income Grows at Slowest Rate Since January 2017

In December 2019, real disposable income was $15,107 billion, which was lower than two of the last three months. This is an unusual occurence in real disposable income. The month-over-month rate of growth was 2.0%, which was the slowest rate of growth since January 2017 and a substantially lower rate of growth than most of the last three years.

The annual rate of growth decelerated to 3.0%, which was its slowest rate of growth since December 2017. It was also down from its peak rate of growth of 4.0% in December 2018. Based on the one-month and three-month rates of change, the annual rate of growth will continue to decelerate in early 2020.

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A diffusion index measuring month-to-month changes in activity at durable goods and discrete parts manufacturing facilities.